BI systems across the enterprise
The most serious business information problem companies face is finding a “single version of the truth.” Many companies are installing best-of-breed systems for order management, fulfillment, call center, marketing, product information, inventory, finance and e-commerce.
Yet no one vendor in the marketplace today can provide more than two of the best-of-breed components needed. Even most ERP systems available to direct marketers don’t provide specialized direct, retail or warehouse management functions that are as good as best-of-breed.
Such systems have given companies access to the best system functionally for end users. But even when they are integrated with one another, you still have numerous - and differing - occurrences of key data and metrics.
The result of all these silos of information is that no one system provides more than 30% of the data needed by senior management; for larger companies it may be only 10% to 15%.
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“SORRY FOR THE DELAY - THANK YOU FOR WAITING”
I just had a pleasant experience with a back order from L.L. Bean. How can you have a good experience with something that’s been on backorder for 6 weeks? Well let me tell how.
First the background. On April 1st, I ordered 5 pairs of chino pants and 1 was on backorder. The CSR told me immediately that the color would not ship until May 15, six (6) weeks later! I liked the color and the price so I let it remain on backorder.
Well guess what? The 4 other pairs came in 2 days shipped for free on my L.L. Bean card and express delivery which is standard. And the back order arrived before May 15th much to my surprise-I’d forgotten it. Who hasn’t had nothing but disappoint with projecting back order dates arrivals?
But even as important, I found something of real interest printed on the backorder’s order/packing slip. On the line above the item was this message:
“SORRY FOR THE DELAY - THANK YOU FOR WAITING”
It struck me, how many times do we thank customer’s for their patience when we disappoint them? And better yet, how many times do we follow through with the promises we make on backorders? But then, that’s why I always use L.L. Bean as one of the standard bear’s for high customer service.
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Ways to Save Money
The following is a brief email that we received from one of our eNewsletter readers, in response to an article we wrote about saving money in your company…
Curt:
Just received your electronic May newsletter and wanted to send you some ways we are saving money.
- Cut utility usage
- Drop non productive associates
- Reduce fulfillment goals from 92% to 85%
- Keep 15% of your OTB in your back pocket
- Only mail your best customers ( we are thinking of prospecting again this summer )
- Drop marginal books
- Flow inventory, more smaller orders, more frequently.
- Keep margins high, but salt the assortment with redlines for the illusion of markdown.
- Offer free personalization instead of a mark down.
We are actually making money on a reduced sales plan.
Hank
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ACCM Tidbits and Opinions
ACCM Attendance: The show had about 500-700 attendees from what I could tell. Like many of the shows we have attended this year the number of attendance looked to be down 50% to 80% from prior years. Penton took a bath on both NCOF and ACCM this year. There is a question in my mind about the viability of two independent shows; I know they are two different audiences.
I will say that those who attended appeared to be decision makers. In my speech on dashboards and KPIs more than 75% of the attendees were new to ACCM. Interesting mix of e-commerce and multichannel managers. If you would like a copy of my PowerPoints, e-mail me at cbarry@fcbco.com.
Companies’ Results: As someone said to me, “The new standard is to be only 10% off plan.” I met many where sales were off more than that even when plan wasn’t very aggressive. Companies with unique product offerings are doing far better than companies with stock or open market product. Jack Rosenfeld, Chairman, Potpourri Collection and Sheryl Clark, President, Boston Proper, during the Monday luncheon panel both emphasized the importance of this. And they cited that their apparel businesses were doing well because they were tuned into the customer.
I did meet a number of niche businesses that seemed to be doing better than the average. They struck me as having unique product niche’s and unique marketing approaches. One of them has grown to $200 million in sales in 2008 from being a start up in 2000! What’s interesting to me is that they aren’t catalog or category merchants. They opportunistically market products that they think will sell - they don’t try to fit it under an existing title. They also test product and don’t buy product initially. We can be critical of the customer service/inventory approach but it’s interesting in terms of sales growth and profitability.
Leisure and hobby product companies seemed to be holding their own.
While there are many companies which are losing money, there were comments about people being surprised that more haven’t shut down already.
Many people expressed increased optimism with the improved stock market of the last 5 weeks. I think it’s really important for the leadership of this industry to remain optimistic. Without hope we don’t have anything. Some days I know it’s tough.
One of the largest business to business list brokers told me that many of their clients were doing OK (meaning flat to down 5%) until this past month when business declined further. No idea why last month was out of the norm with the trend.
Prospecting: Many companies are excited about the possibilities of the USPS “summer sale” on postage. My hat’s off to American Catalog Mailer’s Association (ACMA) for the work they have done with the USPS to help them understand the effects the postage increases have negatively had on our industry. Since July 2007 the ACMA estimates catalog mail volume is down 35%. The year-to-date net loss is $2.5 billion for the USPS compared to LY’s $35 million loss. To learn more about what the ACMA is doing for catalog businesses or to join this great association, please visit ACMA’s website, www.catalogmailers.org
Holiday 2009: Companies seem to be delaying Holiday mailing plans to see a few more “economic tea leaves”. Paper and printing seems to be available. It’ll be interesting to see how circulation plans pan up.
Measuring E-commerce promotional response: As we work with clients on our co-developed dashboard and analytical software product (with Taurus Software, Manage Metrix, managemetrix.com), we don’t see companies being very analytical about measuring E-commerce promotional breakeven. Companies are not measuring the profitability of the promotions. I asked this question in a number of ACCM sessions. No one seems to have been motivated to doing this. In my opinion, this should be a priority given that e-commerce marketing is 2% to 15% in our client companies on top of the catalog marketing costs of 25% to 35% of net sales.
That’s my take on ACCM 2009. Did you go? What’s happening in your world?
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How Do You Know What E-Commerce Promotions Pay?
Historically, the catalog industry has measured the response rate for various promotions, the advertising cost of the promotion and its breakeven based on demand, product cost etc. Along comes the e-commerce world and many of the new promotional methods (such as e-mail, affiliate programs, etc.) are apparently not being measured.
At the same time, companies that were traditionally catalog oriented are spending 25% to 35% of sales for catalog advertising costs to create, print and mail catalogs. On the other hand, while the e-commerce programs are much cheaper our research shows they are spending 2% to 15% of net sales on e-commerce promotions.
The problem today is that the e-commerce costs are additive, incrementally. It’s not an offset to the catalog costs. And at the same time businesses have not been able to decrease catalog costs or eliminate the catalog without severely cutting sales.
How are you measuring your e-commerce promotions in terms of advertising and breakeven?
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Something to Think About
An article in the March 15th Richmond Times-Dispatch caught my eye. “Values Sustain Immigrant Businesses in Downturn” talks about the fact that many of the businesses best positioned to weather a troubled economy are those started and run by immigrants. Why? Because they tend to rely on traditional values: being thrifty, avoiding excessive debt, relying on family support.
Immigrants often come from cultures where pay-as-you-go is the dominant philosophy, because credit is not as readily available as it is (or, at least, was) in the U.S. Gregory Fairchild, an associate professor of business administration at the University of Virginia’s Darden School of Business, says in the article that reliance on personal savings is also more common among immigrant entrepreneurs; in some Asian cultures, savings rates are as high as 15 to 20 percent. Compare that to the U.S., where savings rates have been in the low single digits for years.
Many of the Indian and Asian business owners quoted in the article say that they are reluctant to take on debt. When credit is needed, they usually borrow from family and friends, and then quickly pay it back.
It’s not a perfect solution; as one Asian-American business owner says, “Every single culture has good parts and bad parts. The good part to learn from [Asian] culture is to have the good self-discipline not to get in debt when you can’t afford that.” On the other hand, he says, without mainstream financing “you have less chance to expand yourself.”
Maybe this begs the question of whether we, in business, need to take a good look at our values? Considering the situation we find ourselves in today, it certainly couldn’t hurt.
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and warehouse consulting company. Helping you understand inventory cost savings and warehouse management are just a few of the ways we can help your multichannel business. Please visit FCBCO.com for more information.
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From the Dark Side of Productivity
I’m with a firm that spends much of its time helping clients improve productivity and reduce costs. We are ever mindful of the negative side—the “dark side”—of productivity projects. What is the dark side? It’s what happens if we don’t take the human factor into account. As someone with 30 years of experience in industrial engineering, I can tell you that there is no way to achieve long-term success in a re-engineering project without considering the effect it will have on people.
Two articles in the Wall Street Journal serve as stark reminders of this reality. The first, “Retailers Reprogram Workers in Efficiency Push” (September 10, 2008) described installations of workforce management software at AnnTaylor Stores Corp. and other retailers. According to the article, workforce management systems are “sweeping the industry as retailers fight to improve productivity and cut payroll costs.” As the Journal noted, some workers aren’t happy about the trend, saying the systems leave them with shorter shifts, make it difficult to schedule their lives, and “unleash Darwinian forces on the sales floor that damage morale.”
The Ann Taylor system keeps track of the usual productivity metrics: average sales per hour, units sold, and dollars per transaction. The system schedules the most productive people during the busiest hours—and, because it awards more-productive salespeople with favorable hours, it gives employees an incentive to persuade shoppers to buy things. And it’s worked, as far as the overall economic goals are concerned; the chain’s director of store operations said it has helped turn more store browsers into buyers. But, as the WSJ story made clear, it also resulted in the loss of some veteran salespeople who had developed long-term relationships with customers. By focusing strictly on the metrics that could be easily measured, the system actually penalized associates whose selling style depended on longer interactions with the customer—even though such relationships often assured continued customer loyalty. Others found their hours cut back to the point where they could no longer afford to make the trip to work. During busy times, the formerly congenial staff began competing for customers, sometimes stealing them away from one another. While productivity was, indeed, increased, perhaps the most surprising unintended result of the system was that this story, with all its unflattering aspects, was splashed across Page A1 of The Wall Street Journal.
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Managing Customer Call Center Costs in an Uncertain Economy
Today’s call center mantra is, “Do more with what you have.” In this uncertain economy there is even more pressure to perform miracles by increasing productivity while lowering costs, yet still continuing to provide expected customer service levels. In our consulting engagements with direct call centers and through our F. Curtis Barry & Company Best Practice ShareGroups, we’ve been able to observe the latest call center trends and how managers are dealing with them. Here are some of the major issues that direct customer call centers face, as they examine their costs and try to reduce them without major disruptions to customer service.
Higher Labor and Benefit Costs
There has been a tremendous acceleration in hourly labor rates over the past five years. In addition, our industry is in competition with call center jobs in banks and other financial services, which often pay more and have stronger benefits. As recently as 2003, many of our clients had average pay rates in the $7.50 to $9.00 range, with benefits adding 15% to 20%. Today those same clients are paying an average of $10.50 to $13.00 per hour. Some of those in urban areas are faced with $16.00 to $17.00 per hour, with added benefits in the 25%-30% range. However, there are still fortunate direct call centers with labor rates of $7.50 to $9.00 in smaller cities and rural areas.
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Top Ways to Cut Costs and Improve Customer Satisfaction
Every smart business manager is constantly looking for ways to reduce costs and make the operation more productive. In today’s challenging economic climate, such efforts become even more crucial. Small steps that can help to save money may make a big difference. Our experience in the fulfillment and call center has been that often the same process improvements used to reduce costs also result in better service—and greater customer satisfaction. These are some of our top tips in four of the key areas.
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How Business Intelligence Systems Make Executive Dashboards, KPI Alerts and Analysis a Reality Across Your Enterprise’s Systems
As companies grow in size and complexity, providing actionable, analytical information to senior management has become increasingly difficult. No one system provides more than 10% of the data senior management needs. Key data such as plans and history often exist in spreadsheets outside the information systems. Systems such as the telephone phone switches (ACD) have valuable productivity and service data, but management usually doesn’t have access to it. Reports from commercial systems by software companies often leave the user wanting a lot more.
Multichannel companies not only have multiple channels for dealing with customers; by their very nature, these companies often have multiple systems, with numerous—and differing—occurrences of key data and metrics. Depending on the database design and the age of the information systems, there may even be multiple occurrences of key data within a single system. This problem is actually worse in companies with large scale multichannel “systems”—because in reality, these are multiple individual applications. Many companies have grown up selecting best-of-breed systems, and since no one vendor in the marketplace today can provide more than two of the best-of-breed systems needed, these have disparate databases and designs. With separate systems for order management, fulfillment, call center ACD switches, marketing, product information, inventory, finance and e-commerce, we have created silos of information across the enterprise. ERP system proponents may say, “this is what we have been trying to tell you for years,” but the reality is that most ERP systems available to the direct marketplace don’t provide specialized direct, retail or warehouse management functions that are as good as best-of-breed.
In moderate to large companies the multichannel transaction systems consist of a significant number of information systems and databases. Here are some typical examples: